Randgold’s Bristow defies Kibali ‘skeptics’

Those who questioned the wisdom of building the Kibali gold mine in the Democratic Republic of the Congo (DRC) were mistaken, Randgold Resources’ (LSE: RRS; US-OTC: GOLD) CEO Mark Bristow declared at a media briefing in Kinshasa in October. According to Bristow, the open-pit mine was not only built ahead of time and within budget, but is already producing 1 million tonnes of ore per month. The plant is at 80% of its design capacity and gold sales are set to start.

Randgold owns 45% of Kibali and is the project operator, while AngloGold Ashanti (NYSE: AU) owns another 45% and Congolese parastatal Sokimo owns the rest.

Bristow said Randgold would provide a production forecast for the quarter that could surpass the initial estimate of 30,000 oz. gold, thanks to the mine’s early start-up in September. He vowed that, like all of Randgold’s mines, Kibali would make a profit in its first quarter of commercial operation. The company plans to update its reserves later this year. Once in full production, the mine — one of the largest in Africa — is expected to produce 600,000 oz. gold a year.

“We were able to prove the skeptics wrong because all the stakeholders — notably the Congolese government and people — wanted this mine, and co-operated energetically to bring it into being,” he told reporters in Kinshasa. “The next challenge is to continue our partnership in this spirit and work together to make Kibali successful, so that it can serve as a foundation for building general economic welfare in this region.”

Kibali is Randgold’s fifth gold mine and is located in the Moto goldfields of northeastern DRC, 560 km northeast of the city of Kisangani and 150 km west of the Ugandan border town of Arua.

The mine is being built in two concurrent phases at an estimated initial cost of US$1.7 billion. The operation started in September as an open-pit project, but an underground mine is being developed with a twin decline and vertical shaft access. The companies believe underground ore will be accessed in 2015, and exploration is ongoing.

But while optimistic, Bristow sounded a cautionary tone, saying that the new mine “could be the catalyst for substantial long-term value creation in the Democratic Republic of the Congo . . . if it is handled correctly by all its stakeholders.”

So far, he said, Randgold “has delivered all that it undertook to do, and more . . . expect that the Congolese authorities will also keep their side of the bargain, among other things, by building the administrative capacity required to fulfill their obligations under the mining code.”

The DRC’s mining code is under review and mining companies in the country are awaiting its latest draft for comment.

Bristow says that “we are fully engaged in the review process, and the government is cognizant of our belief that any negative changes to the current code will obstruct the development of further Kibalis in the DRC.”

He noted that “as an enabler of regional development,” Randgold has interested investors and the Congolese government in setting up a palm oil production business in Orientale, the same province in which Kibali is located. Bristow explained that with much of Kibali’s construction complete, the new palm oil venture would create employment opportunities and “could make the DRC an exporter of oil and soap.”

Bristow warned that many mining projects in Africa had not realized their potential because developers and governments tried to cash in, rather than create value.

“In Province Orientale, Kibali’s stakeholders have an opportunity to start with a clean slate, and to demonstrate to the world what can be achieved in Africa through a real partnership between a mining company and its hosts.”